24 Hour Fitness Worldwide, Inc. – Leading Health and Fitness Chain Files Chapter 11 with $1.4bn of Funded Debt Citing “Disproportionate Impact” of COVID-19, Lines Up $250mn DIP Financing and Looks to Reject at Least 135 Leases

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June 15, 2020 – 24 Hour Fitness Worldwide, Inc.and 10 affiliated Debtors (“24 Hour Fitness” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-11558. The Debtors, one of the nation’s leading operators of health and fitness clubs, are represented by Laura Davis Jones of Pachulski Stang Ziehl & Jones LLP. Further board-authorized engagements include (i) Weil, Gotshal & Manges LLP,  as general bankruptcy counsel, (ii) FTI Consulting, Inc. as financial advisors, (iii) Lazard Frères & Co. LLC as investment banker and (iv) Prime Clerk as claims agent. 

The Debtors’ lead petition notes more than 100,000 creditors; estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn ($1.43bn of funded debt). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Wells Fargo (as Trustee for $500.0mn 8.000% senior unsecured notes due 2022), (ii) Kellermeyer Bergensons Services ($8.8mn trade debt) and (iii) Veritas Media Group LLC ($6.3mn trade debt).

In a press release announcing the filing, the Debtors advised that: “due to the disproportionate impact of the COVID-19 pandemic, the Company has voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. In conjunction with the Chapter 11 filing, the Company expects to secure approximately $250 million in debtor-in-possession (DIP) financing. Subject to Court approval, the DIP financing, combined with the Company’s cash from operations, is expected to provide sufficient liquidity and allow the Company to continue operations, including club reopenings, without interruption during the Chapter 11 process.

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Hugo Declaration”), Daniel Hugo, the Debtors’ Chief Restructuring Officer, detailed the events leading to the Debtors’ Chapter 11 filing. The [name] Declaration provides: “But for the COVID-19 pandemic and its detrimental effects on their business, the Debtors would not be seeking the Court’s protection today. As described more fully below, the Debtors were required to close all of their fitness club locations nationwide on March 16, 2020, in accordance with governmental regulations and recommendations, and the vast majority of the Debtors’ fitness clubs remain closed today. Put simply, the COVID-19 pandemic upended the Debtors’ operating model, leaving the Debtors without a source of revenue to fund their operations. With the protection of this Court and the tools that chapter 11 provides, however, the Debtors are confident that they not only can endure the crisis that COVID-19 has presented, but also can transform and modernize their business model in a way that leads to long-term success and relevancy for the 24 Hour Fitness brand and enhances the fitness experience of their millions of loyal members.”

Lease Rationalization 

The Hugo Declaration provides: "The Debtors lease all of their club locations from approximately 300 different landlords. Following the closure of their fitness clubs as a result of the COVID-19 pandemic, the Debtors began to evaluate their lease portfolio to, among other things, quantify and realize the potential for lease savings. The Debtors, together with Hilco, began communicating with landlords in an effort to improve lease terms by agreement and address certain burdensome leases. Relatedly, the Debtors are requesting authority to reject approximately 135 club leases…In addition, the Debtors also have filed the Lease Rejection Procedures Motion…seeking authority to implement procedures to reject additional unexpired leases if the Debtors are unable to negotiate sufficient rent concessions to position those clubs for sustained future profitability."

Principal Prepetition Shareholders

  • AEA Investors: 42.7%
  • Fitness Capital Partners LP: 31.2% and
  • 2411967 Ontario Limited: 22.8%

DIP Financing

The Debtors have arranged a $250.0mn new money debtor-in-possession (“DIP”) facility to be provided by an ad hoc group of prepetition credit facility lenders and noteholders (the “Ad Hoc Group”). According to the Debtors, the Ad Hoc Group holds approximately 63.3% of the aggregate principal amount outstanding under the Debtors’  Prepetition Credit Facility and approximately 73.9% of the face amount of their $500.0mn Senior Unsecured Notes due 2022.

Prepetition Indebtedness

Debt Instrument (Aggregate Principal)

Funded Debt ($ millions)

Prepetition Credit Facility (pari passu)


    Revolving Credit Facility


    Term Loan Facility


Total Secured Debt




Senior Unsecured Notes


Total Funded Debt


About the Debtors

24 Hour Fitness is one of the nation’s leading operators of health and fitness clubs. The Debtors operate out of their two headquarter locations in San Ramon, California, and Carlsbad, California. As of March 31, 2020, the Debtors served approximately 3.4million members in 445 locations across the United States, all of which are leased.

Prior to the March 2020 closure as a result of the COVID-19 pandemic, the Debtors operated in fourteen states and the District of Columbia, with 445 clubs serving approximately 3.4 million members.

Before implementing a reduction in force and a furlough program following the closure of the Debtors’ fitness clubs in connection with the COVID-19 pandemic, the Debtors employed approximately 19,200 individuals. Due to the closure of their clubs in March 2020, the Debtors furloughed approximately 17,800 individuals and reduced their workforce by approximately 700 individuals. After evaluating their go-forward club footprint and implementing certain strategic initiatives, the Debtors further reduced their workforce by approximately 8,300 individuals prior to commencing these chapter 11 cases. As of the Petition Date, the Debtors employ approximately 10,200 individuals, including approximately 8,100 individuals who are employed on a part-time basis.

Corporate Structure Chart

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